Extending losses for a second session, Zee Entertainment Enterprises Ltd shares plunged nearly 10% in intra-day trade on Wednesday after the ministry of corporate affairs ordered inspection into the financials of the company. The stock had fallen 4.2% in the previous session as well.
At 2:08 pm, Zee Entertainment shares were trading at Rs 223 apiece, down 8.8%, after hitting the day’s low of Rs 221.10. The stock has fallen 15% in the last one month and is down 39% for last one year.
According to reports, the corporate affairs ministry has directed its western region head to inspect the books of Zee Entertainment due to allegations of corporate governance lapses and recent resignation of a few independent directors. The inspection has been ordered under Section 206 (5) of The Companies Act.
On 27 November, Zee Entertainment had announced the resignation of independent directors Sunil Sharma and Neharika Vohra, and non-independent director Subodh Kumar. While Sunil Sharma had tendered his resignation on 24 November citing the sale of shares by the promoter group and the reconstitution of the board, Subodh Kumar and Neharika Vohra listed several reasons for their resignation, accusing Zee Entertainment of handing out film advances, promoter loans and being lax on corporate social responsibility (CSR) spending.
Zee Entertainment, however, denied all wrongdoings. The company said that the points made by the outgoing directors were already disclosed to investors through annual reports and other communication modes.
Rating agency Brickwork Ratings India, on 17 December, had downgraded Zee’s cumulative redeemable non-convertible preference shares and the issuer rating, citing resignation of the independent directors and the company secretary, along with dilution of controlling stake of the promoter and promoter group and the stepping down of Subhash Chandra as chairman of the board. Chandra, however, still remains non-executive director of the company.
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